I will accept @Bsch4477 's assessment that this is an asset (I don't know),
but I do want to point out that if this was an asset, you have several new problems.
1. Some of your carrying costs may have been items to add to the cost bass and depreciate, NOT take as expenses. (And of course, any item you expensed, even if it was improper, can't also be used to increase your cost basis since that would be double dipping. You have to correct the expenses in order to capitalize your costs.)
2. You should have been depreciating the asset. It would enter into service at either your cost basis or its fair market value at the time, whichever was lower, and then be depreciated over 39 15 years (corrected timeline).
3. You now must include depreciation recapture tax to recapture the depreciation you took or could have taken even if you didn't take it. Any part of your gain that is due to depreciation is taxed as ordinary income, then additional gain may be eligible as a long term capital gain.
4. And of course, some of your carrying costs from before it was a business asset may be includable in your basis as well, if they could be classified as improvements, but not repairs, maintenance or other expenses that are not improvements. (And I have no idea if dredging is maintenance or an improvement. I suspect it is mostly maintenance if it is maintaining the channel. It might be an improvement if it was opening, widening or deepening the channel.)
You need to talk to a tax pro about this.
